Q2-17: Zeel numbers, PAT up on higher Ad and Subscription revenue

BENGALURU: The Subhash Chandra led content and broadcast player Zee Entertainment Enterprises Limited (Zeel) reported a 23 per cent  hike in consolidated revenue for the quarter ended 30 September 2016 (Q2-17, current quarter) as compared to the corresponding quarter of the previous year. The growth was driven by a 15.7 percent growth in Zeel’s advertising (Ad) revenue, supplemented by a 21.7 percent growth in subscription revenue. Zeel reported consolidated revenue (Total income from operations, TIO) of Rs 1,695.44 crore in Q2-17 as compared to Rs 1,378.59 crore in Q2-16.

Ad revenue in the current quarter was Rs 959.16 crore (56.6 percent of TIO) as compared to Rs 828.98 crore (60.1 percent of TIO) in Q2-16. Subscription Income in Q2-17 was Rs 583.34 crore (34.4 percent of TIO) and in Q2-16, it was Rs 479.14 crore (34.8 percent of TIO) Other Sales and Services Income also more than doubled (by 2.17 times) year-over-year (y-o-y) in the current quarter to Rs 152.94 crore (9 percent of TIO) as compared to Rs 70.47 crore (5.1 percent of TIO) in Q2-16.

Zeel’s Profit After Tax (PAT) in Q2-17 increased 25.4 percent y-o-y to Rs 238.38 crore (14.1 percent of TIO or margin) from Rs 190.15 crore (13.8 percent margin). Operating Profit (EBIDTA) in the current quarter also increased 36.4 percent y-o-y to Rs 489.22 crore (28.9 percent margin) from Rs 358.59 crore (26 percent margin).

Total Expenditure in Q2-17 increased 19.3 percent to Rs 1,239.81 crore (73.1 percent of TIO) from Rs 1,039.65 crore (75.4 percent of TIO) in Q2-16.

Finance costs in the current quarter increased 3.9 percent y-o-y to Rs 8.55 crore (0.5 percent of TIO) from Rs 8.23 crore (0.6 percent of TIO) in the corresponding year ago quarter.

Employee benefit expense in Q2-17 increased 28.1 percent to Rs 153.27 crore (9 percent of TIO) from Rs 119.68 crore (9.9 percent of TIO) in Q2-16.

The company spent 1.5 percent lower towards Advertising and Publicity expense in the current quarter at Rs 115.31 crore (6.8 percent of TIO) as compared to Rs 117.03 crore (8.5 percent of TIO) in Q2-16.

International Business

Zeel’s International Business contributes to about 15 percent of total revenue. International Business revenue in the current quarter increased 29.7 percent y-o-y to Rs 262.20 crore (15.5 percent of TIO) as compared to Rs 202.20 crore (14.7 percent of TIO).

International ad revenue in Q2-17 increased 7.8 percent y-o-y to Rs 79.20 crore (8.3 percent of total ad revenue) as compared to Rs 73.50 crore (8.9 percent of total ad revenue). International Subscription revenue in the current quarter increased 11.5 percent y-o-y to Rs 115.80 crore (19.9 percent of total subscription revenue) from Rs 103.90 crore (21.7 percent of total subscription revenue) in Q2-16. International ‘Other sales and services income’ in Q2-17 almost tripled (by 2.71 times) y-o-y to Rs 67.20 crore (45.5 percent of total other sales and services revenue) from Rs 24.80 crore (43.9 percent of total other sales and services revenue).

Sports Channels

Sports channels revenue in the current quarter increased 66.3 percent y-o-y to Rs 212.50 crore (12.5 percent of TIO) as compared to Rs 127.80 crore (9.3 percent of TIO. Sports channels expenses increased 82.6 percent to Rs 229.30 crore (18.5 percent of Total Expenditure) in Q2-17 as compared to Rs 125.60 crore (12.1 percent of Total Expenditure).

Five new channels launched in Q2-17

The company launched three new channels in domestic market - Zee Anmol Cinema, a Hindi movie channel for FTA audience; Zee Yuva, a youth focused Marathi GEC which would it days would help it consolidate its dominant position in the Marathi market; and Zee Cinemalu, a movie channel in Telugu language, which will help it to increase our reach and expand viewer base in the market. Besides, it launched two new channels – Zee One and Zee Mundo in international markets. This takes its total number of international channels to 40 and channels dedicated to native audience to 12.

With increasing uptake of HD that company says that it is the in process of launching HD version of its regional channels.

Company Speak

Chandra said, “ZEE reported well-rounded strong growth in revenues during the first half of fiscal 2017. While we continue to add new channels to our domestic and international broadcasting businesses our new initiatives in movies, music, events and digital are taking shape and have started contributing to growth.”

Zeel managing director and CEO Punit Goenka said, “At ZEE we are pleased to deliver yet another quarter of satisfying business and financial performance. Our advertising revenues continue to grow ahead of market on the back of improving viewership share and better monetization of our bouquet. Growth in domestic subscription revenue was aided by catch up revenue in Q2.”

“Telecom Regulatory Authority of India (TRAI) has released draft regulations for broadcasting services and interconnection arrangement to increase transparency in content pricing and payment of carriage and to allow consumers to choose channels. These draft regulations are steps in the right direction and propose a host of changes to the existing system. Although it still remains to be seen what form the final regulation will take, we hope that improved transparency will enable various stakeholders to get their rightful share in subscription revenues,” said Goenka.

“The first half of fiscal 2017 has been strong for us. Growth in advertisement spends has held up so far. Moderation in FMCG and e-commerce spends might have some impact on industry growth in the coming quarters. On the positive side increasing competition in telecom business would help ad spend growth. GST roll-out in the coming year could boost advertising spends as a part of potential savings in tax outgo might be reinvested,” concluded Goenka.

Note: (1) The unit of currency in this report is the Indian rupee - Rs (also conventionally represented by INR). The Indian numbering system or the Vedic numbering system has been used to denote money values. The basic conversion to the international norm would be:

(a) 100,00,000 = 100 lakh = 10,000,000 = 10 million = 1 crore.

(b) 10,000 lakh = 100 crore = 1 arab = 1 billion.

(2) All numbers in this report are consolidated unless stated otherwise.

(3) Some of the numbers have been rounded off

(4) Comparitive Q2-16 numbers for International Business and Sports Channels have been obtained from Zeel’s press release for the quarter ended 30 September 2015 (Q2-16).

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